Century Weekly Market Update Mar 11 - Mar 17

Welcome to the Century Weekly Market Update! We’re excited to bring you the latest news and insights from the supply chain and logistics industry over the past week.

Our weekly market update features a dedicated section on emerging industry trends and a report specifically focused on the frequency and impact of port omissions during blank sailings. These updates provide valuable insights to help supply chain decision makers navigate potential disruptions, optimize their supply chains, and stay informed about the latest industry developments. ?

Last week, freight rates on all major trade lanes recorded notable declines. The Panama Canal announced an increase in daily transit slots ahead of schedule, US EV supply chains got a US$ 2 Billion boost, and a Yang Ming ship collided with three large cranes at a port in Turkey. Additionally, a Canadian Labor Tribunal rejected Montreal Port employer’s bid to designate dockworkers as an essential service, leaving open the possibility of strike action.

At Century, we're committed to helping our customers stay a step ahead in this rapidly changing industry. Our team of experts is dedicated to providing comprehensive and timely insights to help you make informed decisions and stay competitive.

Emerging Industry Trends

Projection for Asia Imports to Rise Due to Stronger Than Expected US Economic Outlook

• The US economy's improving outlook is driving the return of import growth from Asia, surpassing previous expectations as US imports from Asia have continually risen since October.
• February volumes are up over 30% Y/Y with factors such as strong employment, high wages, and a thriving housing market touted to be fueling this growth coupled with importers having overcome their overstocked inventory challenges to experience a rebound in demand.
• Fiscal loosening and a softer economic landing are supporting stronger import volume prospects, leading to S&P Global raising its forecast for US real GDP growth to 2.4% for 2024.
• Globally, manufacturing activities are recovering, indicating increased demand for raw materials and components; the global manufacturing purchasing managers' index reached an 18-month high in February 2024.
• The National Retail Federation has also upgraded its import expectations for the first half of 2024 in light of US consumers continuing to drive demand. The automotive sector and decarbonization-related goods are expected to contribute to import growth.
• Container lines are expanding vessel capacity to accommodate the surge in imports, with Asia outbound vessels ramping up capacity as a result, causing Asia-US ocean capacity estimates to rise 22% in March and April, to 1.3 million TEUs per month, compared to January and February.
• There is an overall positive economic outlook for the US in 2024, with robust consumer demand and global manufacturing recovery pointing to a promising year for Asia-US trade, exceeding previous expectations.

Rapidly Increasing Container Imports into Mexico from China are Likely the Result of Circumnavigating the US Trade War

• Container shipping imports from China to Mexico have experienced a significant growth of 60% Y/Y in January 2024, leading to suspicions that it has become a "back door" into the US amidst the ongoing trade war between the US and China.
• Analysts at Xeneta have identified this trade lane as one of the strongest in the world, with the annual growth in container shipping between China and Mexico having already increased by 34.8% Y/Y in 2023, indicating a growing trend.
• Xeneta suggests that this surge in trade may be an attempt by businesses to bypass US tariffs on goods imported from China, stating it is likely that a significant portion of the goods arriving in Mexico will be immediately transported by truck into the US.
• If the current growth rate continues, Xeneta speculates that there could be more containers imported from China into Mexico than the US West Coast by 2031.
• Mexico’s new cargo-only airport further supports the notion of increased imports as its West Coast ports rapidly become a viable, more cost-effective alternative to directly shipping goods to the US West Coast.
• However, the rising volumes may lead to a volatile ocean freight shipping market, and long-term rates for shipping from China to Mexico's West Coast have fluctuated in recent years, often surpassing rates into the US West Coast.

US Trucking is Seeing a Spur in Growth from Domestic Manufacturing of Consumer Goods

• The Cass Freight Index reports a 7.3% increase in its shipments component in February compared to January, driven by an upturn in US manufacturing activity and strong service sector output.
• However, the expenditures component was down 19.8% Y/Y and 27.6% lower than two years ago.
• Truckload pricing may take time to catch up with the increased demand as truck capacity remains readily available, with warmer weather in February and underlying improvement in the US economy contributing to the recent boost in freight demand.
• Although the annualized shipment index was still 4.5% lower Y/Y, it marked the smallest drop in freight volume reported by Cass in 10 months, currently projecting a 3% rise in its shipments index for Q1 2024, with the expectation of positive annualized growth in May.
• The S&P Global US Manufacturing PMI and Service Sector PMI indicate sustained growth, with all sectors showing expansion for the first time since April 2022.
• However, with fragile growth and inflation reduction necessary for sustained improvement according to Cass, a complete recovery in truck freight demand is not anticipated to occur until interest rates decrease and investment increases.

Weekly Blank Sailings Report ?

Century’s Blank Sailings Report for the week of March 11th – March 17th. Discover the latest insights on the current trend of blank sailings through the most up-to-date carrier data direct from Century.

• Last week saw a total of 587 port omissions, a 33.7% decrease compared to the week prior.
• Shanghai recorded the highest amount of port omissions last week with 61, followed by Ningbo with 49, Busan with 38, and Singapore with 37.
• Other ports with notably high omissions last week were Shekou with 30, Yantian with 26, and Xiamen with 25.
• Ningbo recorded the biggest W/W increase in port omissions, rising by 45.2%
• Looking towards the coming weeks, Century’s data shows a 3.4% increase in currently scheduled blank sailings for week 12.
• Next week’s preliminary data shows notable increases in port omissions to be expected at ports in Ningbo, Kaohsiung, Ho Chi Minh City, Chittagong, Kingston, and Hamburg.

Port omissions data for the most frequently omitted ports during week 11 can be found in the table below:

Our?full Blank Sailings Report for the week of March 11th – March 17th below provides a full list of every currently scheduled port omission from Week 11 to Week 21 as of March 18th, 2024. The second tab breaks down this data into an easy-to-read table which shows port omissions by?each location per week so you can see which locations are being omitted the most and which locations are experiencing the sharpest increase in port omissions.

Click here to DOWNLOAD the full Week 11 Blank Sailings Report

Week in review

Freight Rates Continue Falling on All Trade Lanes

• Freight rates on all major trade lanes, including trans-Pacific, trans-Atlantic, and Asia-Europe have all recorded W/W declines as the Global Container Freight Index dropped 7% W/W.
• Trans-Pacific freight rates have now recorded four consecutive weeks of declines.
• Rates from China/East Asia to the US East Coast declined by 4% W/W to US$ 5,875.
• Rates from China/East Asia to the US West Coast also fell by 4% W/W to US$ 4,244.
• Freight rates from China/East Asia to North Europe fell 10% W/W to US$ 3,871, whilst rates to Southern Europe saw a slightly larger decrease of 7% W/W to now sit at US$ 4,155.

The Red Sea Crisis Has Not Caused Any Significant Changes to Vessel Size Deployment for Asia-Europe Trade Lanes

• The increased sailing distances caused by the Red Sea Crisis-induced diversions has, as expected, led to both increased fuel consumption and higher slot costs, however, larger, more fuel-efficient vessels are now being deployed for utilization purposes which should bring slot costs back down.
• Among the major alliances, 2M and THE Alliance have maintained stable average vessel sizes, while Ocean Alliance witnessed a significant increase following the Red Sea Crisis, followed by a subsequent decline.
• However, relying solely on average vessel size may not provide a comprehensive understanding, as outliers at either end of the spectrum can skew the results. Examining the median vessel size alongside the average vessel size yields a more accurate assessment.
• In the case of the Asia-North Europe trade lane, the median vessel size aligns closely with the average vessel size for 2M, indicating consistency in vessel deployment.
• For Ocean Alliance, excluding outliers reveals that the average vessel size remains stable, despite temporary fluctuations.
• THE Alliance demonstrates a notable deviation between the average and median vessel sizes coinciding with the commencement of round-Africa sailings primarily due to the suspension of the FE5 service, which had a lower average vessel size.

Panama Canal Announces Increase in Daily Transit Slots Ahead of Schedule

• The Panama Canal Authority (PCA) has announced an increase in the number of daily slots from 24 to 27 by the end of March in response to the growing demand for transits and positive projections for the water levels in Lake Gatún at the center of the canal.
• Two additional slots for Panamax vessels will be auctioned for transit dates starting from March 18th, 2024, with another slot becoming available for transit dates beginning March 25th.
• The increase applies to Panamax vessels, allowing the daily count to rise from 17 to 20, while larger Neopanamax ships will still have seven slots per day.
• Waiting time for non-booked vessels going northbound is around 1.1 days, while southbound trips face a backlog of 5.5 days.
• Whilst the canal is currently in its transitional dry season and water levels are below the average, they have improved compared to the height of the drought last year, and the PCA plans to gradually increase the daily slots if rainfall arrives as expected in May, with a goal of returning to about 36 vessels per day.

Manufacturers Assessing how the SEC’s Climate Ruling Will Impact Their Supply Chains

• Following the Securities and Exchange Commission (SEC) passing its climate disclosure rule last week, which mandates public companies to disclose climate-related risks in their SEC filings, manufacturers are now determining how to apply the rule and how it will impact their supply chains.
• A notable change to the ruling was the dropping of the requirement for the inclusion of Scope 3 emissions in companies’ disclosures whilst a “phased in” approach was implemented for disclosing Scope 1 and Scope 2 emissions.
• Large accelerated filers starting (companies with a minimum of US$ 700 million in shares held by public investors) are required to begin disclosing their Scope 1 and 2 emissions in FY 2026, whilst accelerated filers (companies with US$ 75-700 million in publicly held shares) must start in 2028.
• Compliance timelines for receiving assurance on Green House Gas (GHG)emissions will also be phased.
• More disclosure rules are expected, with states like New York and Illinois considering similar bills, and an increasing amount of private sector companies requiring emissions disclosure from suppliers.

Air Cargo Growth on East Asia-North America Trade Lane is Being Driven by E-Commerce

• According to the chief economist of the International Air Transport Association (IATA), e-commerce is driving the growth of the East Asia–North America air cargo trade lane.
• In 2023, international cargo ton-kilometers (CTKs) on this trade lane increased by 3%, representing a notable outperforming of other trade lanes which IATA attributes to the expansion of e-commerce and the direction of trade towards the Americas.
• Despite the challenges faced during the pandemic, air cargo is holding its own in the world trade arena, gaining market share, and is expected to continue being a significant contributor to aviation sector growth.
• The aviation industry has returned to profitability in 2024, albeit with slim profit margins, and now aims to become more robust, with Asia anticipated to experience the highest growth this year.
• However, the return of passenger aircraft has increased belly capacity and air cargo capacity, which, when coupled with the aviation industry being particularly affected by inflation due to its high fuel costs, poses challenges for some air cargo businesses to remain profitable in 2024.
• Potential US East and Gulf Coast Strike Action has AAFA Urging Biden Administration to Intervene in Contract Talks
• The American Apparel & Footwear Association (AAFA) has called on the Biden Administration to intervene and restart negotiations between the International Longshoremen's Association (ILA) and the United States Maritime Alliance (USMX) to avoid a potential strike by US East Coast and US Gulf Coast port dockworkers.
• The ILA, representing 45,000 dockworkers, has set a strike deadline for October if a new contract is not reached by September 30th, 2024, a deadline which the has the AAFA urging immediate engagement by the Biden administration to prevent a disruption.
• This strike would likely have a significant impact on the apparel and footwear industries as over half of their products are imported through these ports.
• The AAFA warns that a coast-wide strike would lead to significant price increases on their goods, damage the reliability of US East and Gulf Coast ports, and contribute to inflation in the US economy.
• The association highlighted the ongoing challenges faced by the supply chain, including the Red Sea crisis and drought affecting the Panama Canal, and emphasized the potential risks to trade with Central American countries that rely on these ports.

US EV Supply Chain Gets US$ 2 Billion Boost from Lithium America Loan

• Lithium Americas has secured a US$ 2.26 billion loan from the US Department of Energy (US DoE) to build processing facilities at its Thacker Pass mine in Nevada.
• The project aims to produce 40,000 tons of battery-grade lithium carbonate per year, supporting the production of up to 800,000 electric vehicles annually.
• The mine is considered the largest known lithium reserve in North America and is seen by the Biden administration as a critical component of its plan to develop a domestic lithium supply chain.
• General Motors has invested US$ 650 million in Lithium Americas and has exclusive rights to purchase the lithium production from the project for up to 15 years.
• Lithium Americas is currently in the planning phase and expects to start major construction later this year after securing the majority of the capital it needs from GM and the loan from the US DoE.
• The US DoE has prioritized lithium and battery supply chain projects, offering loans to support the entire ecosystem, from lithium extraction and processing to battery production and recycling.

Evergreen and Wan Hai Report Sharp Decline in Revenues for 2023

• Carriers Evergreen Marine and Wan Hai Lines reported reduced operating revenues for 2023, with Wan Hai experiencing a net loss for the full year.
• However, both carriers have seen a rebound in revenues in the first two months of 2024 due to higher freight rates; Evergreen reported a 30% rise in revenue for January and February, while Wan Hai Lines saw an 8% increase.
• Evergreen's net profit for 2023 dropped to US$ 1.1 billion from a record US$ 11 billion in 2022, with operating revenues declining by 56%, however, the second half of 2023 showed improved profitability compared to the first half.
• Wan Hai Lines reported a net loss of US$ 184 million for 2023, a significant decrease from the US$ 3 billion net profit in 2022, with operating revenues also falling by 61%, reflecting the carrier's shift towards intra-Asia business and a smaller fleet.
• Both carriers have made adjustments to their fleets and operations to respond to market changes and manage costs. Despite the challenges faced in 2023, the rebound in revenues in early 2024 indicates a potential improvement in their fortunes.

Yang Ming Ship Collides with Three Large Cranes at Turkish Port

• On March 16th, 2024, the Yang Ming owned ship ‘YM Witness’ was involved in a major accident while docking at the Evyap Port in Istanbul, Turkey.
• The 368-meter-long vessel approached the docking area at a sharp angle, resulting in a collision with one of the port’s four large cranes which are used to unload shipping containers.
• Resultantly, the collision caused a total of three cranes to topple over and several cargo containers to fall into the water, causing serious injuries to at least one crane operator.
• Local police and firefighters were called to investigate the scene and help those who were endangered.
• Yang Ming is expected to be held financially responsible for the damages caused by the accident and has stated that it will reach out to affected businesses whose merchandise may experience delays due to the incident.
• The YM Witness was operating on the MD3 eastbound Mediterranean shipping route of the company.

Canadian Labor Tribunal Rejects Montreal Port Employers Bid to Designate Dockworkers as an Essential Service, Leaving the Option Open for Strike Action

• The Canadian labor tribunal has rejected a request from the Maritime Employers Association (MEA) of maritime employers at the Port of Montreal to categorize container services as an essential service, which would have barred workers from strike action if it had been approved.
• The request for an essential service designation was made amid ongoing contract negotiations that have been unresolved for seven months, however, the Canadian Industrial Relations Board’s rejection means that the possibility of strike action by longshore workers remains open.
• Talks between the MEA and the Canadian Union of Public Employees (CUPE) Local 375, representing Montreal's dockworkers, hit an impasse prior to the expiration of the previous contract.
• Direct negotiations between the MEA and the union were halted when CUPE requested the intervention of Canada's Federal Mediation and Conciliation Service (FMCS) which oversaw the talks, but no agreement was reached, and their oversight concluded in December.
• With the lack of an essential services designation, CUPE is now permitted to strike with a 72-hour notice to employers. The MEA hopes that the FMCS can intervene again in the negotiations.

Sources

Air Cargo News

Freightos

JOC

JOC

JOC

JOC

Sea Intelligence

Sourcing Journal

Sourcing Journal

Supply Chain Dive

Supply Chain Dive

Taiwan News